The income tax return (ITR) is an important exercise for taxpayers. While paying ITR, one always looks for ways to save income tax. There are a number of savings options where you can park your hard earned money and get decent returns and at the same time you will get tax advantages.
Looking to save income tax but not sure which financial instruments to invest in? Don’t worry, we’ve got you covered! Here is a list of investment options that can help you save tax this year:
A government-backed investment scheme, the Public Provident Fund (PPF), is primarily used to build up a retirement fund. With PPF, you can claim a tax refund of Rs 1.5 Lakh under Section 80C.
The PPF has a lock-up period of 15 years. However, you can withdraw money from the PPF account or continue the scheme for another 5 years.
The National Pension System (NPS) is also a government-backed investment option that helps you build a retirement fund. The NPS can be used by both private and public sector employees. The NPS program offers the choice of investing in two different account types – Tier 1 and Tier 2.
Tier 1 falls under Section 80CCD(1) and 80CCD(1B), while Tier 2 is a voluntary scheme. The minimum amount that can be invested in Tier 1 is Rs 500, while the figure is Rs 1,000 for Tier 2.
3. LIFE INSURANCE
One of the main ways to save tax is to invest in a life insurance plan. With life insurance, you can claim a tax refund of up to Rs 1.5 Lakh under Section 80C. If you are looking to invest in the unit linked insurance plan, the tax refund limit increases to Rs 2.5 Lakh.
The Equity Linked Saving Scheme (ELSS) comes with mutual funds that have a lock-up period of 3 years. ELSS helps you actively invest in the stock market and save Section 80C taxes.
5. TAX SAVING FIXED DEPOSITS
With tax saving fixed deposits, you can claim a tax refund of up to Rs 1.5 Lakh under Section 80C. The lock-in period for this scheme is 5 years, with early withdrawal not being an option.
6. SENIOR SAVINGS PLAN
The Senior Citizen Savings Scheme was introduced as a regular income stream for people over 60. The plan has an interest rate of 7.4%, with early withdrawal also an option.
7. NATIONAL SAVINGS CERTIFICATE
The National Savings Certificate Scheme is supported by the Government of India. It has a duration of 5 years. At the end of the term of the investment, all the money can be claimed by the investor and the full amount of the maturity is reinvested in the program. You can claim a tax refund of up to Rs 1.5 Lakh under Section 80C of the scheme.
8. SUKANYA SAMRIDDHI YOJANA
The Sukanya Samriddhi Yojana was created to help the little girl financially. With this scheme, you can claim a tax refund of up to Rs 1.5 Lakh under Section 80C.
9. HEALTH INSURANCE
Along with the health insurance premium, you can claim a tax refund of up to Rs 25,000 for yourself, your spouse and your children under section 80D. The limit rises to Rs 50,000 if the premium is paid for the elderly.
10. HOUSING LOAN
Under the home loan scheme, you can claim a tax refund of up to Rs 1.5 Lakh on the repayment of principal under Section 80C. If the mortgage is contracted jointly by two people, they can both apply for a tax reduction. Additionally, you can claim a tax refund of up to Rs 2 Lakh on interest under Section 24.
For first-time home buyers, an additional tax refund of Rs 50,000 is available. However, the loan amount must be less than Rs 35 Lakh and the value of the property less than Rs 50 Lakh.
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